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Summary Kulum

This document discusses the role of institutional investors and intermediaries in promoting good corporate governance. It explains that institutional investors, as representatives of fund owners, should act to benefit owners and can positively or negatively impact corporate governance through their investments. However, rules for institutional investors are limited and compliance with corporate governance needs increased. The document also states that insider trading should be prohibited and reputational agents should minimize conflicts of interest when advising investors.

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Muhammad Rizki Triawan
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50 views

Summary Kulum

This document discusses the role of institutional investors and intermediaries in promoting good corporate governance. It explains that institutional investors, as representatives of fund owners, should act to benefit owners and can positively or negatively impact corporate governance through their investments. However, rules for institutional investors are limited and compliance with corporate governance needs increased. The document also states that insider trading should be prohibited and reputational agents should minimize conflicts of interest when advising investors.

Uploaded by

Muhammad Rizki Triawan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Institutional Investor, stock market, and other Intermediaries

Objectives

Explain role of instituitonal investor and intermediaries in promote good corporate governance

Explain the need for institutional investor and intermediaries for GCG

Why insider trading and market manipulation should be prohibited. Ways to prevent them.

Investor

Control or non-control
Personal/individual or institution (Banks, Insurance, pension fund)

CG system constitute

Core: Shareholders, directors (executive or non executive)


Stakeholders: employee, unions, customers, suppliers, NGO
Reputational agents: Accountatns, lawyers, credit rating, media governance analyst
Influencers: Laws and regulations (UU PT , OJK)
Standards: accounting, auditing, governance

Principle: Good corporate governance should be implemented on every part of capital market,
including Institutional Investor

Institutional investor representate owner of the fund, proxy advisorshould be acting according to the
fund owners benefit.

Institutional investor can have positive or negative impact on Good corporate governance due to their
big size.

Good: Enforce corporate governance on the investees corporation, especially if long term
investment
Bad: act according to their own self-interest, do harm on other investor, lack of oversight

Example of negative CG on institutional investor:

Dana pensiun pertamina 2016, bad choice of investment, more speculative than it should be

Sub-principle a&B

Inst. Inv acting in fiduciary capacity should disclose their CG and voting policy. Including
procedure on deciding the use of their voting right
Disclose how to manage material conflict of interest

Institutional investor engagement:

Monitor investee companies


Have guidelines on when and how to escalate stewardship activities
Be willing to work collectively with other investor

Institutional Investor legislation challenges

There are rules for insurance and pension fund, but no guidelines.
No rule that encourage/facilitates investors communication/collective action
Complience with CG need to be increased

Type of investors&share in equities

PLC policy on shareholder engagement

PLC should have communication with shareholders (investor relations, public expose)
PLC having comprehensive policy for shareholder communication and encourage attend
GMS are rare
Materials for shareholder meeting not public

Sub-principle C

Inst. Investors acting in fiduciary should disclose conflict of interest management (acting
on shareholder interest than fund owners)

Sub-principle D

CG framework should require reputational agents to provide analysis or advise relevant to


investor decision, disclose and minimise conflict of interest

Example: Big short, rating agency over rate bond rating because pressure from investment bank,
appraisal over-value home to justiy higher loan value or lender withhold payment/refuse to
pay/blacklist

Sub-principle E

Insider trading should be prohibited and applicable rules enforced

Policy for insider trading: prohibit material private information usage for trading stock or tipping.
Timing on transaction, trade only based on public info (withold trade before the information becomes
public) Institutional investor representate owner of the fundhave to act according to the owners
will

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